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Jefferies Remains Bullish on Chinese IT Services Segment, Tweaks Estimates on (HSFT), (ISS), (VIT) Following Earnings

November 17, 2011 9:48 AM EST
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Jefferies remains bullish on companies within the Chinese IT services segment as HiSoft Tech (Nasdaq: HSFT) and iSoftStone Holdings (NYSE: ISS) both reported better than expected earnings and raised their guidance. VanceInfo Tech (NYSE: VIT) was the only one within the firm’s coverage to miss earnings and lower guidance.

HSFT reported its Q3 results on November 4th with $0.26 per share in earnings on $58.9 million in sales, ahead of the firm’s estimates of $0.23 per share and $56.7 million. To go inline with management’s new guidance and market trends, Jefferies is raising its Q4 EPS and sales estimates from $0.24 and $59.5 million to $62.9 million and $0.28. The firm also raised its FY11 and FY12 EPS estimates from $0.81 and $1.00 to $0.88 and $1.04. Jefferies is reaffirming its $17 price target on shares of HSTF as it currently offers a 40 percent upside.

ISS reported its Q3 results on November 14th with $73.7 million in sales and earnings of $0.15 per share, topping the firm’s estimates of $73.6 million and $0.14. To reflect the increased guidance by management and the current market conditions, Jefferies raised its Q4 sales and EPS estimates from $82.8 million and $0.18 to $86.2 million and $0.19. The firm is also raising its FY11 and FY12 EPS estimates from $0.56 and $0.74 to $0.57 and $0.80. Jefferies is reaffirming its $14 price target on shares of HSTF as it currently offers a 36 percent upside.

VIT reported its Q3 results on November 15th with $70.3 million in sales and earnings of $0.14 per share, which were below the firm’s estimates of $71.5 million and $0.20. To reflect the new guidance, Jefferies raised its Q4 and FY12 revenue guidance from $75.7 million and $327.1 million to $85.2 million and $340.5 million. The firm also cut its Q4, FY11, and FY12 EPS estimates from $0.24, $0.85, and $1.00 to $0.20, $0.74, and $0.94. The firm is reducing its price target on shares of VIT from $19 to $18, but notes that its new price target still calls for 60 percent upside. An analyst at Jefferies comments, “the stock's current price indicates our belief that despite recent poor margin execution, the shares still offer longer-term value (given robust underlying top-line growth).”


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